Q2 2021 Hudbay Minerals Inc Earnings Call
Good morning, ladies and gentlemen, thank you for standing by welcome to the HUD Bay Minerals, Inc. Second quarter 2021, the results conference call.
At this time, all participants are in listen only mode.
Following the presentation, we will conduct a question and answer session to join the question queue. You May Press Star then 1 on your telephone keypad should you need assistance during the conference call you may signal and the operator by pressing star and zero I would like to remind everyone that this conference call is being recorded today August 10th.
2021 at 830, a M. Eastern time, I will now turn the conference over to Candace Brule director of Investor Relations. Please go ahead.
Thank you operator, good morning, and welcome to HUD base 2021 second quarter results Conference call High based on financial results were issued yesterday and are available on our website at Www Dot High Bay Dotcom.
A corresponding Powerpoint presentation is available and we encourage you to refer to it during this call. Our presenter today is Peter could kill ski and Beach, President and Chief Executive Officer accompanying Peter for the Q&A portion of the call will be Steve Douglas, Our senior Vice President and Chief Financial Officer cash.
Omar our senior Vice President and Chief operating Officer, and Eugene Lee, Our senior Vice President corporate development and strategy.
Please note the comments made on today's call may contain forward looking information and this information by its nature and subject to risks and uncertainties and as such actual results may differ materially from the views expressed today for further information on these risks and uncertainties. Please consult the company's relevant filings on SEDAR and Edgar the.
These documents are also available on our website as a reminder, all amounts discussed on today's call are and U S dollars unless otherwise noted and now I'll pass the call over to Peter could kill ski Peter.
Thank you Candace and good morning, everyone. Thanks for joining us.
Sort of halfway through the year and starting to see a bit of light at the end of this long 18 months tunnel.
We're still facing COVID-19 related impacts on the business we.
We will continue to be vigilant and adapt to changing environment with our focus remaining on safe and efficient operations.
This quarter marks the beginning of our transition to a higher production and cash flows as we complete the investment programs at our growth projects. After the successful ramp up of the high grade copper gold pump of Concho deposits are Peru operations achieved record gold production and the second quarter and are on track for higher copper and gold production and.
'twenty 'twenty 2.
The new Britannia Gold Mill remains ahead of the original schedule as the first gold pour and is expected this month and the copper flotation circuit remains on track for commissioning and ramp up by the end of the year.
We expect to see increased cash flows from these high return investments beginning in the second half of 'twenty 'twenty 1.
And this presentation today.
Touching on our second quarter results discuss the progress we've made on our growth and ESG initiatives and more detail and recap the many near term catalysts, we have of head.
Second quarter consolidated copper production was 23.5 thousand tons of.
4% decrease from the first quarter of 'twenty 'twenty 1.
It was primarily as a result of lower copper grades at the Triple 7 mine in Manitoba, partially offset by higher throughput at the Constancia operation in Peru.
Consolidated gold production was approximately 40000 ounces and increase of 12 per cent compared to the previous quarter due to record gold production of achieved and Peru from pump of contract.
Consolidated zinc production and the quarter decreased by 23%, while silver production decreased by 2% versus the first quarter, primarily as a result of lower grades and recoveries.
Consolidated cash cost per pound of copper produced was 84 cents and the second quarter.
And improvement over the first quarter, mainly due to higher byproduct credits.
Sustaining cash cost increased to $2.25 per pound and the second quarter, primarily due to higher sustaining capital expenditures, partially offset by higher byproduct credits.
Continue to expect consolidated cash cost and sustaining cash cost to be within our annual guidance ranges for 2020.1.
Operating cash flow before change in non cash working capital was $133 million during the second quarter, reflecting an increase of $42 million compared to the first quarter of 2021the.
The increase is primarily the result of higher realized metal prices and higher copper and precious metal sales volumes, partially offset by lower zinc sales volumes.
The adjusted net earnings and adjusted EBITDA, and the second quarter with 2 cents per share and $143 million respectively. After adjusting for the net mark to market loss on financial instruments among other items.
As discussed last quarter sales volumes that were affected by shipping delays and the first quarter, we recognized as revenue during the second quarter, which was partially offset by higher tax expenses.
We exited the quarter with $294 million and cash and equivalents lower than the previous quarter, mainly as the result of capital investments as we complete our growth initiatives, and Manitoba, and Peru, along with interest payments during the quarter.
Our full year 2021 key production and operating cost guidance has been reaffirmed.
Turning to slide 4 you'll find the summary of our operating results were all Peru business unit during the quarter.
Constancia produced 19000 tons of copper.
10000 ounces of gold.
468000 ounces of silver and 295 tons of molybdenum.
Production was higher than the first quarter of 2021 primarily as a result of increased throughput and improved gold grades and recoveries compared to the first quarter.
Though it is a small part of our business. We note. The molybdenum production is anticipated to be below annual guidance in 2020.1 but in line with the recent mine plan published for Constancia.
We expect the production of all our key metals and Peru to be in line with 2021annual guidance.
All of mine during the second quarter was 16% Hyatt and the first quarter as the result of strong operational efficiencies and the smooth ramp up at the pump of country.
Due to its short ramp up period pump of Concho also achieved commercial production in April of 2021.
All mills during the second quarter was 17% Hyatt and the first quarter as the prior period was impacted by of scheduled mill maintenance shutdown offset slightly by increased all hard and we'll see in the most recent quarter.
The mill grades for copper were lower than the prior quarter in line with the mine plan and milled gold gold grades increased by 75% due to higher gold head grades from pump of culture.
As a result of these higher grades we achieved record gold recoveries during the second quarter.
The unit operating cost improved over the first quarter of 2021 primarily due to a higher volume of ore milled, partially offset by higher cost associated with COVID-19 protocols.
Covid related cost and Peru of $6.3 million in the quarter were higher than budgeted and are expected to continue at these levels for the remainder of the year.
Excluding these costs unit costs with $10.40 per timely and the second quarter and we expect unit cost to be in line with the 2021guidance range after adjusting for and budgeted COVID-19 related costs.
Peru's cash cost was relatively unchanged and the second cost compared to the first quarter higher mining cost and higher G&A cost for from enhance COVID-19 protocols would generally offset by lower milling cost and higher gold byproduct credits sustain.
Sustaining cash cost increased this quarter due to the same factors affecting cash cost offset by higher sustaining capital expenditures.
I've mentioned previously first production that pump of Concho was achieved in early April 2020.1.
The team has executed a quick and efficient ramp up the achieving the timelines assumed in our recently published mine plans of the Constancia operations slide.
Slide 5 shows the recent photos of the mining activities and the pump of concert pit, where you can see the significant progress made during the second quarter.
Pump of cancer contributes to the improved Constancia mine plan by incorporating high of copper and gold grades from 'twenty to 'twenty, 2 to 2025 and increasing annual copper production to a bottle of 100000 tons beginning in 2022.
Yeah.
Moving to the next slide on Manitoba, but before I discuss the results I wanted to take a moment to extend our deepest condolences to the family and those affected by the fatal injury at Lalor in June.
This was the first fatality at HUD Bay and over a decade, and we have completed a thorough investigation of this tragic incident, we are committed to preventing similar occurrences and we have undertaken an initiative to apply lessons learned from the this loss across our business.
Overall production and Manitoba in the second quarter was lower than the first quarter, primarily as a result of COVID-19 related absences and interruptions at our snow Lake and fin flow and operations of scheduled maintenance shutdown at Lalor and the temporary suspension of operations at Lalor at the end of June for the investigation of the faithful.
Incident.
The operations produced 21, and a half thousand tons of zinc for point 4000 tonnes of copper 30000 ounces of gold and 218000 ounces of silver.
Lower grades lower recoveries and ore stockpiling for the new Brittania Mill also contributed to lower production this quarter.
While all mines during the quarter was lower than the first quarter due to the factors I mentioned earlier gold grades were higher as you're moving to the gold rich zones at Lalor consistent with the mine plan and expectations.
Copper zinc and silver grades were lower in part due to the remnant mining of triple 7 which results in higher quarter over quarter variation as triple 7 nears the end of its mine life and the mining sequences at Lalor.
Development and underground construction activities continue and the lower part of the Lalor mine to support the startup and ongoing operation of the new Britannia Mill.
At the end of the second quarter, approximately 47000 ounces of gold I'm, sorry, 47000 tons of gold had been stockpiled as initial feed for the new Britannia mill and increase of 21000 tons from the end of the first quarter.
The incremental mining actively associated with growing the gold ore stockpiled has contributed to elevated combined mine mill and the G&A operating cost during the first and second quarters of 2021.
The stall concentrator processed all available or during the second quarter, which was 12% load and the first quarter of 2021 stole recoveries during the second quarter were higher for copper and loaf of zinc and precious metals versus the previous quarter, but were consistent with metallurgical models.
Ore processed at the flow from concentrated increased 16% compared to the previous quarter as a result of processing available ore stockpiles.
Unit operating cost slightly decreased compared to the first quarter and remained within the annual guidance range.
Manitoba cash cost per pound of copper produced was negative $3.51 lower than the first quarter, primarily due to higher byproduct revenues and lower copper production.
Sustaining cash cost per pound of copper produced was 36, which was lower than the first quarter, primarily due to the same factors affecting cash costs.
Full year of production of all metals and unit operating cost and Manitoba are on track to achieve the guidance ranges for 2021.
Slide 7 discusses the progress of the new Britannia projects in more detail.
Furbished meant activities of the gold mill was completed in June and commissioning and startup activities occurred in early July.
As I mentioned the first gold pour is expected in August in line with the timelines of assumed in our guidance, which are ahead of the original schedule to produce first gold before the end of the year.
And Youll gold production from Lalor and the Snow Lake operations is expected to increase to over 180000 ounces of at average cash cost and sustaining cash cost net of byproduct credits of 412 and $788 per ounce of gold respectively. During the first 6 full years of new Britannia is operation.
The construction of a new copper flotation facility is on track for commissioning and ramp up in the fourth quarter of 2021.
The overall project is approximately 95% complete as of the end of July.
As noted last quarter, we have seen COVID-19 related cost pressures on the project capital forecast at new Britannia and have been areas of cost escalation with industry cost inflationary pressures as the project nears completion.
And as a result, we expect approximately $20 million and additional growth capital to be spent this year at new Britannia.
We also expect an additional $10 million to be spent on the advancement of the stall recovery improvement project and he looks a lot of our expansion to 5300 tons per day and the impacts of foreign exchange movements.
This additional spending represents the next phase of growth in Snow Lake, where we are bringing forward and prioritizing the low capital high return and brownfield growth projects that were contemplated in the recently published optimized mine plan.
Therefore of Manitoba total growth capital guidance in 2020, 1 has increased to $105 million from $75 million.
Slide 8 provides highlights of the exciting exploration initiatives underway in each of our regions.
In March of this year, we announced a couple of well discovery with our 2020 initial drill program intersected high grade copper sulfide and oxide mineralization on our private land in Arizona and depths much shallower and Rosemont.
The 2020 program confirmed the discovery of for deposits at Copperweld with the combined strike length of over 5 kilometers and opportunities to discover additional mineralization and between the deposits.
And the intersections included 440 feet of 1.38% copper and 246 feet of 0.7% copper starting at surface, which serves as an example of the high grade and shallow nature of the copper mineralization.
The expanded 2021 and exploration program at couple of of is well advanced with 85000 feet of drilling completed and the first half of the year and 4 drill rigs currently turning at site.
We expect to publish and update once the majority of assays have been received for the holes drilled during the first half of 2021.
We are advancing the many technical studies for copperweld.
We are also evaluating several targets identified through geophysical surveys on our extensive regional land package.
We are on track to complete and initial inferred resource estimate before the end of the year and the preliminary economic assessment in the first half of 2022.
In Peru, we continue to progress discussions with the community of with Chicago on the highly prospective Maria Reyna and Cabo, Utah properties, both of which are located within 10 kilometers of Constancia.
At the end of June we commenced drilling at the Yoghurt and copper porphyry target located northern Peru near the city of true here and in close proximity to existing infrastructure.
The initial confirmatory phase of the drill program consists of 5000 meters with 2 drill rigs presently turning at site.
Pending positive results from this initial drilling phase the second phase aimed at defining and initial mineral resource for yoga and as expected in the following quarters.
The Scouting a total drill program was completed at the <unk> North target near Constancia during the quarter copper sulfides and oxides were intercepted by the grades to load to the economic.
Regional exploration efforts and the snow Lake area of continue following on the success from the 2021 and winter drill program and the Chisel basin, where the copper gold rich feeder of the 19 O..1 deposit was discovered and high grade zinc and gold mineralization was confirmed through infill and extension extension drilling.
Our summer program includes a follow up limited growth program.
On a new target identified immediately north of the Lalor mine from a borehole survey completed early this year.
The results from our 2021 build program and Snow Lake are expected to be incorporated into the annual mineral reserve and resource estimates to be published at the end of March 2022.
Turning to slide 9 I'd like to highlight the number of ESG accompanied with the accomplishments and initiatives we've undertaken as outlined in our 2020 integrated annual and sustainability report published in May.
And we truly do believe that continuously improving how we manage the social environmental and economic risks impacts and the opportunities associated with our activities is critical for our long term success of large part of achieving this objective is to ensure our disclosure is clear and transparent.
As such the data in our sustainability report is mapped to the global reporting initiative the <unk>.
<unk> metals and mining industry standard and T C F D and.
Additionally, we provide disclosure through the CDP climate water and forests questionnaires.
On the environmental side I'd like to acknowledge that over 50% of our total energy consumption in 2020 was from renewable sources and all the electricity at our operations is supplied by third parties be of regional grids.
This reflects the nearly all of the electricity produced and Manitoba is through renewable hydropower and and Peru over 50% is from renewable sources.
And we voluntarily support several international best practice standards, including ISO 14001, ISO 45001, ISO 9001 towards sustainable mining.
The voluntary principles on security and the human rights and International Finance Corporation performance standards.
As a member of the mining Association of Canada, we have implemented the towards sustainable mining protocols at all of our operations with the goal to maintain the score of a or higher for all protocols.
And 1 requisite of maintaining the school is the commitment to ensuring that our tailing storage facilities of constructed following the Canadian dam safety guidelines, which represent substantial alignment to the new global Tailing standard released in 2020.
And of course top of mind enough yield as always safety, especially with the recent incident at Lalor, we have a culture focused on safety at HUD Bay and doing our best to ensure everyone has the tools and protocols. The required to go home safely and of every shift, but we are never satisfied when it comes to the safety and we are committed to.
Continuously improving on our performance.
At <unk>, we recognize the tremendous opportunity that we and the mining industry have to positively contribute locally and globally to a more sustainable world where.
We will continue to use the 17, United Nations sustainable development goals that are part of the United Nations 2030 agenda for sustainable development to inform and guide our business decisions and sustainability performance.
I'd like to take a moment to congratulate David Carey of Vice President of corporate social responsibility on his recent appointment as chair of the mining Association of Canada. This is a remarkable achievement and 1 that is well deserved and the CSR leader David is the driving force of a positive <unk>.
<unk> and we know he will help guide our industry and HUD Bay to ever higher standards during the crucial time for Canada's mining sector.
I'd like to conclude with slide 10, summarizing the many catalysts that we've come up to that have kind of that are coming up and the near term.
And we and.
And we do have an exciting back and 2.2021.
In Manitoba, we anticipate our first gold pour during the this quarter and completing the copper flotation circuit before the end of the year.
We will also continue our work on executing the third phase of our snow Lake gold strategy, including the preparation for the ramp up to 5300 tonnes per day at Lalor and the recovery improvement program at the stall mill.
We also continue this year's exploration program and the Chisel basin and as I touched on earlier, we will incorporate the results into our annual mineral reserve and resource update in March next year.
In Peru, I mentioned, the drilling that is underway at yogurt and the potential to initiate the second phase aimed at defining and initial mineral resource estimate in 2022.
Hopeful that we will achieve and exploration agreement with the community of with Chicago Unexciting Greenfield per.
Properties to the north of Constancia.
And Arizona, we expect to provide an exploration update in the coming months, followed by an initial resource estimate before the end of the year and to pay 8 to be released in the first half of 2022.
We are also awaiting a decision at the United States Ninth Circuit Court of appeals relating to the Rosemont federal permits before the end of the yet.
And at Mesa, and we will continue to compile and interprets historical data on our land package in preparation for the future drill program.
As I've said before we are of disciplined copper focused growth company and as we look to deliver the next stage of growth and high Bay, our priorities over the medium term will be to unlock value at rosemont drilled of Copperweld discovery.
Test the Constancia regional exploration targets and reserves to the Snow Lake mine plan and advanced Mason and the exploration pipeline projects and optimize value from snow Lake gold, while remaining vigilant for other opportunities that match, our strategic criteria and never losing focus of prudently managing our balance sheet.
And with that we're now happy to take your questions.
Thank you we will now begin the question and answer session.
To join the question queue. You May Press Star then 1 on your telephone keypad your hair tone acknowledging your request.
We are using a speakerphone please pick up your handset before pressing any Keith can withdraw. Your question. Please press Star then 2 we will pause for a moment of colors to join the queue.
Our first question comes from RF, while Codell of Scotiabank. Please go ahead.
Hi, good morning.
Peter I was wondering if you could give us a little bit of a refresher on Peru with respect to your stability agreement in terms of.
The longevity of it and with the political changes there.
The recently has there been any engagement to date or any color you can provide on whether the new administration plans to order your existing stability agreement.
Good morning, and thanks very much for the question.
Yes, so absolutely we have of taxability agreements in place and Peru that stabilized administrative tax.
Re remittance of profit and access to foreign currency rules.
Through 2021 'twenty 2 'twenty I'm, sorry, 20% to 31 with 32 for both Constancia and pump of Concha Altima.
Ultimately it provides from corporate tax rate of 32% for this period and it allows us to keep our accounting records and U S dollars for tax eliminating foreign exchange risk and in addition, it allows us to claim accelerated depreciation on movable assets.
Theres other administered and stability that includes mining royalty rates and Peru.
Now.
Your question, whether we think that the.
And that the government might renege on that I would say that the government would have to change the constitution in order to change or terminate legal stability agreements in this case, the new constitution would have to allow for these changes or terminations and state that these changes could be retroactively applied to legal agreements under the <unk>.
The Constitution, we think this is pretty unlikely as it would violate federal constitutional principles and any changes to the constitution would require a majority vote in a much divided Congress remember that.
The Mr. Cristiano President of Castile government does not have the majority in Congress and the process to change the Constitution would take 1 to 2 years is it would require either a majority approval and congress or in other words over 50% or a referendum.
The requiring 2 thirds approval and Congress in 2 consecutive legislative sessions. So in the unlikely event that a stability agreement is ultimately change the terminated we of course have international arbitration rights available to us and we don't think it will get to that point.
Now to your second question with respect to engagement with the current government absolutely. We are we started our engagement with the Mr. Castillo as the government before.
He was named as President of just out of because that's the right thing to do.
We are engaged with the government at various levels and we will continue to be engaged with the government. We understand are fairly well what what he is trying to achieve in Peru, and we do think that what he is trying to achieve and Peru is fairly well aligned.
And with our practices at Constancia in any case. He is looking for what he calls social investment and and what we do at Constancia is precisely that we have over $10 million targeted towards the social investment this year as well as being having being in the position to assist our communities.
With getting access to substantial additional funding net is available under the kind of minera. So so long answer to your question of ours, but yes, we do certainly have engagement of the government.
And just as a follow up I mean, given the current uncertainty of our muni perceived uncertainty on.
And this has changed at all some of your growth plans and Peru with respect to <unk>.
Call it exploration on some of those other deposits or is this do you think this has no impact.
And also it doesn't change those plans whatsoever, because we believe very very strongly and the potential of.
All of those satellites north of Constancia, and and regardless of what the fiscal environment turns out to be.
We think that the discovery that is something of the lack of of less bond vessel and Mackay of something like that carries enormous value regardless of that fiscal regime, and we will continue to pursue.
Our efforts in Africa.
Great. Thank you Peter.
You're welcome.
Our next question comes from Jackie <unk> of BMO capital markets. Please go ahead.
Thanks, very much and maybe I'll just follow up on the RF last question and I know you.
And the release that you are.
Our working on yes.
And again right now on Peru.
And I think you had previously said you were expecting to be drilling and some of the other properties and Peru closer to the Constancia like Marie Arena.
And Mr. Carl.
And this year can you maybe talk a little bit about 1 of your exploration plans are for those properties that are closer to constancia.
Sure Jackie and thanks for the question.
So so we have already done as I mentioned in my remarks, some by a sort of pilot training at <unk>, but our focus is very much on Maria Reyna, and and kind of Utah right now.
These are 2 properties that are owned by the cost of community.
Our operating team is engaged with the community in order to reach an agreement in order to access that.
Those properties, we are hopeful that we will conclude that agreement to the course of this year.
But remember what I've said previously that once we conclude that agreement there is still a way to go because we have to do the theirs.
We have to go through Consulta Previa process, we need to go through environmental baseline <unk> and ultimately obtain the drilling a permit needed to commence and so it's unlikely I think that we would start actual drilling much.
Much before very late next year, if next year, although we would we should be able to commence with.
Surface investigation as soon as we have of community agreements and perhaps I'd just ask casualty to comment if there's any other nuance.
And that I haven't mentioned no, yes, I think thats.
Thats right everything you said is correct and.
As we know what's happening and Peru. These negotiations.
Take some time.
And Jackie you mentioned again, our drill program is on underway.
Underway there we're drilling.
We're confirming the previous 20 or so of holes that were drilled by golly, that's going well with community participation and we've had no interruptions and we hope maybe and the next quarter or 2 to be able to give some results from that drilling. So it shows that drilling can be accomplished and Peru and difficult areas.
And we're still working towards our agreements with the Jakarta.
Thanks, very much and and maybe that's a good segue speaking of difficult areas.
You didn't really talk a lot about rosemont and your.
The release.
And this time.
And certainly there's a lot more commentary on the copper world and you can.
Can you maybe give us a bit of and update I know it's difficult given that you don't have the court ruling.
It's not yet, but a couple of world looking.
The relatively more attractive at this point would you say versus rosemont or can you give us any commentary on how those 2.
2 projects sort of stack up against each other.
Okay.
Jack this the Super interesting and Christian and.
I would say that our top priority remains to.
To get roselawn through the ninth Circuit court of Appeals.
That is priority number 1 bad copy.
Coupled with the couple of discoveries certainly does provide us with a very very interesting either alternative or add on.
And and so we've done and as you know a lot of work on on Copperweld.
And we've identified 4 separate deposits with the potential for several more.
The strike length of some 5 kilometers.
Some of those drill results that I mentioned are pretty outstanding and the most interesting feature is that.
Mineralization starts from surface. So so clearly it's something that you can get into right away.
But we have to complete the assay program. That's currently underway. So that we can develop that inferred resource by the end of the year. So that we can in turn and complete a P..8 early next year and that really will inform us with respect to.
Sort of how the 1 stacks up against the other.
But in any case.
I'd like to come back to my initial comment that Rosemont does remain a priority for us, but Papa pop of World presents a super exciting.
The potential alternative or addition.
Yes. Thank you.
Thanks, a lot of it.
Welcome.
Our next question comes from Greg Barnes of TD Securities. Please go ahead.
I'm just kind of follow up on Jackie's question on couple of well.
And just assuming you could go ahead of that alone.
Argument's sake.
And we're looking at.
And I'm, assuming separate 4 separate deposits 4 separate pits of centralized milling facility.
And all the team and the tailings do you have the space what is the concept.
Working on from the PEO.
Yeah, Greg Good morning, and thank you for that.
So remember.
That is a combination of our oxide mineralization and sulfide mineralization such that there is potential obviously for and oxide operation as well as the sulfide operation we have adequate land.
And on which to deposit tailings as well as on which to deposit waste rock.
So we feel fairly comfortable about that now and now the key will depend on the mineral processing.
A technical studies that we undertake as to what the processing and routes for the oxide might be so so before we before we complete that work, we don't know whether it's going to be and 60 W. Pronged to watch but for sure there would be of combination.
All of 2 plants in order to treat the on the 1 hand oxide mineralization of the oxide ore and the other in the sulfides cash flow you want to elaborate on that at all yes sure. It presents a great.
A good problem for engineers, and geologists and our metal or just and what we're discovering is that exactly what Peter said oxide mixed transition and also the sulfide ore. So theres a combination of flow sheets that might be optimal and there might be of starter mine on and oxide there might be of sulfonation plant and there certainly will be and.
The future of the sulphide flotation.
So what we're doing is we're doing the proper leaching tests to understand exactly what that is and that takes time and some 6 or 8 months. So that's something we expect maybe by the end of this year very optimistically and more likely early next year.
Or into next year and so we're doing all of that work. That's the metallurgical work. We continue with 4 drills right now we're turning we're following up on our drill intersections on the.
Private land.
And then 1 of the things our engineers are looking at is optimizing that drill program to understand where this mineralization is on private land and the future. If it extends on to government and how do we optimize those pits and the placement of waste the play.
And from tailings et cetera, et cetera, and so we're working towards it and it's going to take again, the better part of the rest of this year to figure out of our mine plans.
But we think with.
And with the lower strip ratio when and comparison to Rosemont. It will present, a very positive set of economics, and a very compelling case to move forward.
And I don't understand what the permitting and approvals processes on private land.
So what you see and we continue to move forward and the best from that perspective.
And how long would it take.
Greg This is the only to 2 primary state payments that are quiet, 1 is and air quality permits and the other is an aquifer protection permit and as I said those of both state they will permits and the.
The a much simpler than the federal permits the.
Generation required for each of those permits is.
I would.
And with venture a guess of a year of 1 to 2 years.
Yes, I think that's right and those if you remember those of the 2 types of permits we successfully defended in the past at Rosemont.
And most of that requirement and what sort of a requirement.
That is the growth.
That's the goal with the current mine plan and we're trying to obviously construct.
Got you okay, great. Thank you.
Our next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
Hey, guys good morning.
And then getting the including the majority of loans.
Great.
Maybe just almost of the collective bargaining agreement.
Essentially adding cost pressures for example, or was there any.
And the Colombia and Peru.
Right now from growth.
Correct.
And I'd say in general that the agreements that we concluded and Peru.
Consistent with the everything.
And everything else, that's being done elsewhere in Peru, and and I don't think that there is any material the effect on our overall cost.
Great.
And then just on the Covid costs and Peru, So they stepped up a bit and Q2 versus Q1.
Now it's still early in Q3, but where are you seeing those cost trending so far and they continue.
And the March are they starting to dissipate at this point.
The loss and what I would say is that we expect them to be flat for the remainder of the year. So I would mention that we had like $6.3 million of Covid related cost.
And the second quarter and these cost arise out of it and abundance of caution.
And how we operate all my and so for example, we have extended the duration of the quarantining and Cusco and Arequipa.
We have and several cases day mobilized on the progressive basis.
The operators from the mine.
Uh huh.
And when we've had events that have suggested that we should be exercise caution.
We sort of expect that to continue at that level of the remainder of the year. So roughly I would say 20.
$25 million of Tso for the yeah, and the Covid related costs.
Net flat from now on.
Okay, Great that's very helpful.
And then also on the freight and related cost and payroll.
Dale and thank you guys.
The tick up quite a bit and.
Q2 versus Q1 of at least on a per ton of cost basis is the Q2 level.
Sort of a persistent and the Q3.
And we should expect from the remainder of the year as well.
Well, we have we have more sales and so on a relative basis, we shouldnt expect any any significant change.
Alright, and kitchen, Okay, great yeah.
And then and then just finally on the exploration of agreements for access to Maria right now and.
Kind of E mail.
Well those once the settlement is reached any sort of the community cash payments that will be made or is this just.
The agreement in principle that sort of set the stage for future exploitation consultation, where there will be the cash payment.
Are they the loss and they would no doubt the some cash payments of the community because that's the only incentive that they already have other than of course.
And the potential for and mined on the road, but they would be looking for some of interim.
Cash payments of course, not at the same level as exploitation agreement.
The levels.
Okay. That's great. Thanks, so much Peter.
Youre welcome.
Our next question comes from Stephen <unk> of <unk> Securities. Please go ahead.
Okay. Thanks, very much guys I'm just.
And I guess on the question about the Covid cost in Peru, and just to be clear you.
And you mentioned your guidance it still stays and in effect for 2021, just wondering is that based on cost to date, and then cost going forward, including or excluding that sort of give or take $6 million per quarter run rate.
And just so that I understand your question fully you're asking me if the cost of $6.3 million our cost just in the quarter and if we expect that run rate that is the run well and well I guess it is.
If you have another sort of $12 million through the remainder of this year will you still be in line with your your your cash cost guidance for the year will that put you over.
We would obviously have to adjust the guidance, but are we so what I've been saying is that we all within guidance, excluding those COVID-19 related yeah. Okay. Okay. Okay got it thanks, and then and it looks like the question has been asked but just can you maybe just give us a bit of and update on sort of the Queensland strategy here going forward, obviously triple 7 and still scheduled for closure.
And I guess in June or so of next year.
Is the plan and obviously there is still the put the concentrate or and tailings on care and maintenance and then shut everything else down or are we at with that.
And we will put the so obviously of Triple 7 mine itself would be closed and then we would put the process facilities on care and maintenance.
Okay, and then is the refinery gonna be closed or put on care and maintenance.
Zinc plant will be closed and that would be close okay. Okay. Great. Thanks, very much guys.
Youre welcome.
Once again, if you have a question. Please press Star then 1.
Our next question comes from Dalton Barreto of Canaccord. Please go ahead.
Hi, Thanks, good morning, Peter and team.
And I'm trying to understand the go forward plan for Rosemont here post post the decision on.
So if you win I mean, no doubt, it's going to be upheld and that's all.
And I take a couple of years, so kind of a 2 part question number 1 are you willing to move forward with major investments given the uncertainty around that and number 2 how is that appeal of going to impact your share shop for a partner on the project.
Morning, Dalton and thanks for the question look I think that.
There's no point for us there's no point and are searching for a partner until we have until the appeal is behind us.
It's 1 thing for search and the other piece is that if we win that appeal I would like to say when we were net appeal, but if we win that appeal and.
As you have suggested is just not smooth sailing because there's a number of things we have to do we have cost have to reevaluate the estimate because of some time has passed but remember too that.
The the case under review by the ninth Circuit Court of Appeals is effectively the Keystone case that would stop all activities with the singular decision.
Is why we think judge sort of landed on that ruling in the first place, but there are several other decisions that remain to be made which in fact could.
The impact how this project.
Is moving forward.
Of the thing to note of course is that.
The biological opinion is still being addressed by the forestry service and and needs to come back to the court. So there are a number of things that could extend the period of time required in order to implement.
The construction at Rosemont.
So.
And what I'm trying to say to you is that you are exactly right and that is at least the couple of years that would be required in order to start.
Start moving into the field.
So given that scenario does it makes sense of also.
Set of Rosemont, and the context of copperweld and on private land only.
Sorry could you repeat the question.
And I just said so given what you just said and the potential ongoing delays and noise and does.
Does it make sense from you guys to also consider of Rosemont as part of kind of the copper raw series of deposits and none of the project on pilot and only the debt does that scenario become more preferable I guess I should say.
100% and in fact, what I should have said as part of my response to the first part of your question was that although we see that there is.
And some time required in order to resolve roam on rosemont, regardless of whether we get the decision now not.
The top of World.
As is.
Very very very compelling alternative if we need and alternative or a very very compelling add on but.
For sure we are going to push copperweld forward.
Very hard and and you know I think the timeline and that would be of offline specifically that we're going to compete and inferred resource by the end of the year and.
And publish of P. A early next year should give you a sense of the the value of that replace on these deposits and the potential alternative or incremental effect that it would have with respect to rosemont.
Okay. So and then maybe just on that no..1 final question from me.
Yes, the permitting and legal issues aside on.
On the activity on top of the World right. Now are you seeing of you were tracking any ngls to those on profit.
No we have very very little attention on the project, we've actually had a fair amount of AR.
Positive media coverage on them.
But I think there's general recognition that.
This the.
The project is on our private land and so it was much less attention.
Perfect. That's all from the guys. Thank you.
Our next question comes from Pierre Vaillancourt of Haywood. Please go ahead.
Hi, Peter.
I was wondering if you could be a little more specific on constancia.
With regards to how how we should look at that going forward I mean, I think we recognize that.
Despite the stability agreements youre going to have to make compromises with the casino of government. So how do we model that.
In terms of looking at looking at taxes of looking at.
The community payments.
The kind of thing I mean things.
Things are going to change there's no question there maybe.
And maybe maybe.
Alright, the a little more specific on that.
Moving per look it's very difficult to be specific in an environment, where we don't have any of the specifics yet, but what I would say.
Is that the team in Peru, and determined to work with the current administration.
And then the price with the prior to any of administration and the relationship that we have built interim beeville cost with the communities in our area of interest with direct influence and indirect influence I think sort of sets the tone for how we will work with the government.
We have targeted as I said 1 of the earlier.
A question and $17 million of social investments into those communities, but that is that's direct investment into the community and that is aside from the expenditures we have within those communities on the services that they provide so you know obviously, if you're going to have to work harder at this and rigor and going to have to work together with the government at the order.
And to better understand.
Its objectives of our social investment.
But I still do think and area that we will target hard is how to liberate funds that are available to those communities from proceeds of the kind of the monero, but 2 to provide you with any sort of.
Discrete or definitive information on how that how the environment may turn out is very very difficult to do other than to remind you that we do have a stability agreements.
Okay, Thanks, and just with respect to the whole copper world discussion I mean based on what I'm hearing on.
On the call here.
Even if you do get a favorable decision.
For Rosemont.
And im getting the sense that maybe copper world may still yet to come.
Priority.
Given given potential appeals and so.
Most of the PPA.
And maybe that really becomes the focus is that.
Out of.
Of potential potential outcome.
I mean, if you look at the range of potential the outcomes of full absolutely. It has the potential outcome.
We are driving top of world of forward hard.
And we hope that it could compete with with Rosemont.
So never say never I think that if the Rosemont timing does drift and couple of certainly has the potential to become a key area of focus or a priority.
Okay. Thanks, David.
This concludes the question and answer session I would like to turn the conference back over to Candace Brule for any closing remarks.
Thank you operator, and thank you everyone for taking the time to join US today, Please feel free to reach out to our Investor Relations team with you of any further questions. You may disconnect. Your lines at this time.
Okay.
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